MARIANNE M. JENNINGS. Its Legal, Ethical, and Global Environment. 7 th Ed. Chapter 2 Business Ethics and Social Responsibility. What is Ethics?. Examples: Senator Toricelli. Jason Blair. Dennis Kozlowski.
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MARIANNE M. JENNINGS Its Legal, Ethical, and Global Environment 7th Ed. Chapter 2 Business Ethics andSocial Responsibility
What is Ethics? • Examples: • Senator Toricelli. • Jason Blair. • Dennis Kozlowski. • Definition: normative standards, generally accepted rules of conduct that govern society. • What is “fair”?
What is Ethics? • Applying Standards of Moral Reasoning to Business Dilemmas. • Moral standard is established. • Individual moral standards differ. • Debate over sources of moral standards. • Evaluate moral standards and conflicts as new data appear.
What is Ethics? • Sources of Moral Standards. • Actual or positive law. • Natural law. • Moral relativism or situational ethics. • Religious beliefs or divine revelation. • Conflicts Among Business. • Shareholders want profits. • Employees want safe, secure jobs.
Ethical Dilemmas • Categories of Ethical Dilemmas. • Buying influence or engaging in conflict of interest. • Hiding or divulging information. • Taking unfair advantage. • Committing acts of personal decadence. • Perpetrating interpersonal abuse.
Ethical Dilemmas • Categories of Ethical Dilemmas. • Permitting organizational abuse. • Violating rules. • Condoning unethical actions. • Balancing Ethical Dilemmas.
Resolution of Dilemmas • Blanchard and Peale. • Is it legal? • Is it balanced? • How does it make me feel? • The Front-Page-of-the-Newspaper Test. • How would the story be reported? • Use an objective and informed reporter’s view.
Resolution of Dilemmas • Laura Nash and Perspective. • How would I view the problem if I sat on the other side of the fence? • Am I able to discuss my decision with my family, friends, and those closest to me? • What am I trying to accomplish?
Resolution of Dilemmas • The Wall Street Journal Model. • Compliance: Are you violating any laws? • Contribution: What does this action contribute to my customers, shareholders, bondholders, employees, community, and suppliers? • Consequences: How will this action affect me, my company, my family, our employees, and our shareholders?
Reaching Good Decisions • The Language of Ethical Lapses. • “Everybody else does it”. • “If we don’t do it, someone else will.” • “That’s the way it has always been done.” • “We’ll wait until the lawyers tell us it’s wrong.”
Reaching Good Decisions • The Language of Ethical Lapses. • “It doesn’t really hurt anyone. • “The system is unfair.” • “I was just following orders.”
Social Responsibility • Inherence: • Serve shareholders. • Friedman view. • Enlightened self-interest: • Manager is responsible first to shareholders but serves them best by being responsible to larger society. • Business value is enhanced if it is responsive to society needs. • Invisible Hand. • Best for society to guide itself.
Importance of Values • Ethics Resource Center Study • Firms with written codes of ethics did substantially better as an investment than the general Dow Jones Composite over a 30-year period. • Executives feel ethical behavior strengthens a firm’s competitive edge. • Johnson & Johnson recall of Tylenol earned it high respect and higher earnings in spite of cost.
Why Business Ethics? • Costs of Unethical Behavior • Savings and loan industry and abuses. • Exxon and the Valdez oil spill. • Barings Bank, Gibson Greetings, Procter & Gamble, Orange County, Bankers Trust and derivatives. • Staged gas tank explosion of GM trucks by Dateline NBC.
Creating an Ethical Culture • The Tone at the Top. • Clear signals are necessary for good business ethics. Hotlines for reporting violations. • Sarbanes-Oxley. • Imposes many requirements on accountants, lawyers, directors and officers. • Sentencing Commission: Code of Ethics, Self-reporting and investigation.
Creating an Ethical Culture • Developing an Ethics Stance. • Setting parameters for personal and business behavior. • Setting tone of tolerance or intolerance for behavior.
Creating an Ethical Culture • Watch for Dangers of Unethical Environment. • Intense competition and issues of survival. • Managers making poor judgments. • Employees with no personal values.
International Business • Businesses Must Decide Whether to Operate Under One Uniform Set of Standards. • Cultures, Laws, and Standards Vary • Creates issues of bribes, grease payments, and culture-related gifts. • Problems of economic development where bribery is common.